Mobile carriers feel hard done by
The government may not achieve their target revenue from the telecom industry with just a 5 per cent increase in supplementary duty for the upcoming fiscal year, said senior executives of the country's mobile network providers yesterday.
During the budget proposal last Thursday, Finance Minister AHM Mustafa Kamal announced a 15 per cent supplementary duty on telecommunication services, a significant rise from the previous 10 per cent. This decision came into effect on Friday.
Each year, the taxes are increased in various ways since it is easy to collect revenue from the telecom industry, said Taimur Rahman, chief corporate and regulatory affairs officer of Banglalink.
"The authorities consider the telecom industry to be a cash cow. This is why investors shy away from Bangladesh but jump in wholeheartedly in other markets," he added.
The new supplementary duty rate could give the government an additional Tk 300 crore but it would also damage the industry, said Shahed Alam, chief corporate and regulatory officer of Robi, during a digital press conference organised by the Association of Mobile Telecom Operators of Bangladesh (AMTOB).
The government expects to collect an additional Tk 1,008 crore through this 5 per cent increase. However, this move will only reduce their expected revenue by Tk 700 crore, he said.
The telecom industry considers the tax burden as a major obstruction for growth and this will hinder Bangladesh's journey to become a digital economy, Alam added.
With this backdrop, the AMTOB has asked the government to review the new tax as the telecom sector has been declared as an essential service.
To address their concerns, AMTOB General Secretary SM Farhad said that the organisation already contacted Telecom Minister Mustafa Jabbar, who expressed frustration over the budget and assured that the Prime Minister's ICT Affairs Adviser, Sajeeb Wazed, was informed on the matter.
Currently, the telecom industry accounts for about 7 per cent of Bangladesh's economy.
If the telecom companies get a more favourable business environment, then it will help the industry contribute up to 10 per cent of the economy within a very short time.
"But this is not the case. Instead, the sector has found a new challenge in running regular operations."
In terms of the customer to revenue ratio, Bangladesh's telecom sector is in the lowest position.
In terms of taxes, however, Bangladesh's mobile network providers pay the highest tax among their counterparts in other South Asian countries.
"This imbalance cannot continue for much longer," Farhad added.
Besides, the country's existing tax policies are not business-friendly for potential investors of the sector.
This directly contradicts the government's vision for a 'digital Bangladesh' and the burden ultimately falls on consumers.
In fiscal 2014-15, taxes levied on the telecom industry amounted to only 15 per cent tax. Since then, however, that value has ballooned to 33.25 per cent.
Following the recent hike in supplementary duty, if any customer recharges Tk 100, they will hardly get a talk-time value of Tk 75.05 while the remaining sum will go to the exchequer directly.
Mobile network providers already have to pay the government about Tk 51 to Tk 57 per Tk 100 sale due to all the taxes and revenue sharing and this will only increase because of the new duty.
Echoing the sentiment, Hossain Sadat, director and head of public and regulatory affairs of Grameenphone, urged the government to withdraw the new supplementary duty.
As of March, there were 16.53 crore active mobile connections in the country. Of them, 9.52 crore are connected to the internet, according to the Bangladesh Telecommunication Regulatory Commission.
Annual revenue from the market currently stands at around Tk 25,000 crore.
Apart from this tax, it was also recommended in the proposed budget to increase VAT from 30 per cent to 50 per cent. This means that if any dispute arises, carriers will have to pay 50 per cent of the revenue regulator's claim to get a settlement.
"We are seeing it as a regulator ensuring its revenue, not justice," said Alam from Robi.
Meanwhile, Farhad said that corporate tax on telecom and tobacco products is the same at 45 per cent while the minimum tax rate on tobacco is less.
For minimum tax, tobacco producers pay 1 per cent of their total revenue, which will remain the same in the coming year while network providers will pay 2 per cent.
"Does this indicate that telecom services are a bigger health hazard than tobacco?" Farhad said.
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